[jonbig04]

I'm no expert, but is the age old "buy and hold" still good policy? Certainly it has worked in the past. Below is a monthly chart of the S&P going back 40 years.


Click for full size - Uploaded with plasq's Skitch

As you can see, buy and hold certainly worked for a large chunk of the time. Especially for those who started putting away back in the 60's, 70's and 80's, otherwise known as the baby boomers. Maybe the same people who are responsible for promoting the "buy and hold" strategy.

Sure it worked for them. But will the same thing work for us younger folk? It looks like buy and hold stopped working around 1997. Is there a possibility that the current generations will have to be more nimble with their finances, or at least more financially savvy than the baby boomer generation?

Could we say that the uptrend from 1969-1997 was due in most part to America's booming economic growth? And if so, can we expect that same growth in the coming decades?

Something that has been on my mind.

[karim0028]

Originally Posted by jonbig04 »

I'm no expert, but is the age old "buy and hold" still good policy? Certainly it has worked in the past. Below is a monthly chart of the S&P going back 40 years.


Click for full size - Uploaded with plasq's Skitch

As you can see, buy and hold certainly worked for a large chunk of the time. Especially for those who started putting away back in the 60's, 70's and 80's, otherwise known as the baby boomers. Maybe the same people who are responsible for promoting the "buy and hold" strategy.

Sure it worked for them. But will the same thing work for us younger folk? It looks like buy and hold stopped working around 1997. Is there a possibility that the current generations will have to be more nimble with their finances, or at least more financially savvy than the baby boomer generation?

Could we say that the uptrend from 1969-1997 was due in most part to America's booming economic growth? And if so, can we expect that same growth in the coming decades?

Something that has been on my mind.

Buy and hold has been dead for at minimum the last 10 years.... What we went through was 2 bubbles, one stock and the other housing......

I think its never a good idea to buy and hold (better aptly called, buy and pray ).. I believe that if you have positions in a portfolio (ie. not necessarily trading money) you need to have stops when/if the floor drops out, i would say 10-15% under where you bought (at the widest, as long as you bought around a support zone)... You can always buy in again, also keeping in mind that you should move to lock in profits, not just stop loss at break even...

This does require that you track the market on a somewhat regular basis... But, if you have money in the market, then you should be watching at minimum semi-regularly

[DugDug]

I dont believe buy and hold has ever really worked in most instruments.
Its generally pushed by fund managers who are not active to say that you should invest over the long term and you cant beat the market etc; etc.
These usaully reinvest everything and also rebalance as the stocks that made up an index generally completely change over a 40 yr period.
It does work for those as a savings plan that cant watch the markets or cant make sensible economic decisions.
(put it this way if it was that easy - go and borrow 100million - plough it into the market and offer to repay it and the difference to the bank in 30 years. They should be happy to lend it to you as you are just going to buy and hold and this surely would beat interest rates - risk free with a slight banking premium - wouldn't it - especially if they are the bank pushing the buy and hold idea!!)
Once you account for inflation, interest costs and you dont reinvest your dividends and profits it does not look as good. Whilst it does have a tax advantage - lets ignore that for now as we are talking about trading and everyones circumstances are different.

long term trend trading aims to capture these big moves and its not buy and hold either.

There is nothing wrong with a money management system that reallocates between different sectors - bonds, real estate, cash, equities, commodities whilst maintaining a portfolio with exposure to all of them - the key here is to have a very simple valuation system for each product an to go overweight underwight etc;

Remember buy and hold is good if you only want to match an index...... it probably should form a part of the portfolio separate to the trading one - I have seen good mixes of 70-80% strategically allocated buy and hold and 20-30% actively traded....

Utimately it will depend on which art of the cycle you are in - my portfolio will most likely be worth more in 50 years than it will today - however I will be dead and that does not do me any good does it.

[jonbig04]

Originally Posted by DugDug »

I dont believe buy and hold has ever really worked in most instruments.
Its generally pushed by fund managers who are not active to say that you should invest over the long term and you cant beat the market etc; etc.
These usaully reinvest everything and also rebalance as the stocks that made up an index generally completely change over a 40 yr period.
Once you account for inflation, interest costs and you dont reinvest your dividends and profits it does not look as good. Whilst it does have a tax advantage - lets ignore that for now as we are talking about trading and everyones circumstances are different.

long term trend trading aims to capture these big moves and its not buy and hold either.

There is nothing wrong with a money management system that reallocates between different sectors - bonds, real estate, cash, equities, commodities whilst maintaining a portfolio with exposure to all of them - the key here is to have a very simple valuation system for each product an to go overweight underwight etc;

Remember buy and hold is good if you only want to match an index...... it probably should form a part of the portfolio separate to the trading one - I have seen good mixes of 70-80% strategically allocated buy and hold and 20-30% actively traded....

Utimately it will depend on which art of the cycle you are in - my portfolio will most likely be worth more in 50 years than it will today - however I will be dead and that does not do me any good does it.

I'm mostly thinking about everyone else. Working class Americans who, almost by design, know nothing about the market and aren't allowed to hire performance based money managers. It's a complete ripoff.

Most of these people have no choice but to buy and hold because that's what their financial advisers are going to put them into.

[DugDug]

Jon - a wise man said to me when I was about 15 years old....
"spend 10-15 minutes every day reading the financial press, then 1 hour on the weekend and learn from it, you will never miss the time and it will cost you nothing however it will save you a fortune over your life time"

Most people spend more time researching the car ( a depreciating asset) they are going to buy rather than a stock they will buy.

If your advisor is telling you to buy and hold a market index then they are putting themselves out of a job as you go and match some indexes, regularly invest and dont pay people fees.

In terms of getting enough money to invest in a portfolio of active good hedge fund managers - thats a whole other problem

[karim0028]

I personally think investment advisors are a crock of shit, most of them, know nothing about fundamentals or technicals and are just pedaling whatever their firm tells them to push...

For instance i have a friend of mine who works for Fidelity or one of these other investment services... He was telling me that now is a good time to get into 30 year municipal bonds.... Now, in my head, in the next 5-10 years shorting bonds at their present highs, is a no brainer, as they are a market like any other.... But, his take was where else are you going to get a 4-5% return.... True, but that is not so good when the value of the municipal bond tanks once Tbonds start providing higher yields as the markets are all inter-related... Looking at TBond prices, they are at all time highs, with interest rates (yields) essentially approaching zero...

I spent alot of time explaining it to him and he still didnt get it.... He just kept re-gurgitating the "but where else are you going to get that kind of return".... I don't care about the "return" if there is significant risk of initial capital involved... Like missing the forest through the trees...

Folks, going to advisors that have no clue about markets are like sheep being led to the slaughter..... If you have money, learn to invest it for yourself, dont delegate your money out unless you have seen a track record that proves the advisor knows what he/she is doing... Otherwise, the old saying goes; "a fool and his money are soon parted"....

[jonbig04]

Originally Posted by karim0028 »

I personally think investment advisors are a crock of shit, most of them, know nothing about fundamentals or technicals and are just pedaling whatever their firm tells them to push...

For instance i have a friend of mine who works for Fidelity or one of these other investment services... He was telling me that now is a good time to get into 30 year municipal bonds.... Now, in my head, in the next 5-10 years shorting bonds at their present highs, is a no brainer, as they are a market like any other.... But, his take was where else are you going to get a 4-5% return.... True, but that is not so good when the value of the municipal bond tanks once Tbonds start providing higher yields as the markets are all inter-related... Looking at TBond prices, they are at all time highs, with interest rates (yields) essentially approaching zero...

I spent alot of time explaining it to him and he still didnt get it.... He just kept re-gurgitating the "but where else are you going to get that kind of return".... I don't care about the "return" if there is significant risk of initial capital involved... Like missing the forest through the trees...

Folks, going to advisors that have no clue about markets are like sheep being led to the slaughter..... If you have money, learn to invest it for yourself, dont delegate your money out unless you have seen a track record that proves the advisor knows what he/she is doing... Otherwise, the old saying goes; "a fool and his money are soon parted"....

I couldn't agree more. I'm not really talking about people like us who live in the markets, but the blue collar people who think their financial advisers know what they're doing. The truth is if those guys could make money in the market they wouldn't be advisers. They have no incentive to perform because they get paid regardless. Federal laws prohibit normal people from being able to take advantage of performance based managers, which is complete BS to me.

My point is that if buy and hold is dead (let's face it, that's all most financial advisers know how to do) where do lay people go with their money?

[karim0028]

Originally Posted by jonbig04 »

I couldn't agree more. I'm not really talking about people like us who live in the markets, but the blue collar people who think their financial advisers know what they're doing. The truth is if those guys could make money in the market they wouldn't be advisers. They have no incentive to perform because they get paid regardless. Federal laws prohibit normal people from being able to take advantage of performance based managers, which is complete BS to me.

My point is that if buy and hold is dead (let's face it, that's all most financial advisers know how to do) where do lay people go with their money?

They go to the wolves.... Sorry, not trying to be coy or anything.... NO ONE has any incentive to make YOU more money than you; unless your Buffett your not going to get that kind of attention...

The system is setup that way... Its made so that you are always invested and the pro's are the one's that make the money in fees and speculation..... I'll give you an example.. I had a 401k plan paid for by a company i work for, completely provided by them, i didnt add anything to it... I noticed the market beginning to turn and i wanted to sell it and go to cash, i wasnt allowed to, it had to always be invested.... I had to watch it lose half its value...

Another example, i dont remember where i read this, but, Blackrock group is a private company setup by one of Bush's friends; made specifically to manage SS funds... How hard can it be to make money, when the company is setup specifically for that purpose and when that funnel of money is being pumped into your company every 2 weeks?

Do they have to get a great return? Nope, just keep pace with the market...